THE JURY CHARGE IN INSURANCE CASES

MARK L. KINCAID

George, Brothers, Kincaid & Horton, L.L.P. 114 West 7th Street, Suite 1100

Austin, Texas 78701

State Bar of Texas ADVANCED INSURANCE LAW COURSE

April 24-25, 2014 Houston

CHAPTER 12

MARK L. KINCAID GEORGE BROTHERS KINCAID & HORTON, L.L.P.

1100 Norwood Tower, 114 West 7th Street

Austin, Texas 78701

(512)495-1400 (512)499-0094 fax

EDUCATION

B.B.A. with honors, University of Texas (1980)

J.D. with honors, University of Texas School of Law (1983)

EMPLOYMENT

George Brothers Kincaid & Horton, L.L.P. (2012–present)

Kincaid & Horton, L.L.P. (1997–2012)

Law Office of Mark L. Kincaid (1991-1994, 1995-1997)

Adjunct Professor, University of Texas School of Law (1995-present) (Insurance Litigation)

Public Counsel, Office of Public Insurance Counsel, State of Texas (1994-1995) (appointed by

Gov. Ann Richards to head agency advocating for the interests of Texas insurance consumers)

Longley & Maxwell (1984-1991)

Managing Editor, Texas Consumer Law Reporter (1985-1992)

Briefing Attorney, Supreme Court of Texas, Justice Franklin S. Spears (1983-1984)

AWARDS & CERTIFICATIONS

Board Certified in Consumer & Commercial Law (1993), Civil Trial Law (1993), and

Civil Appellate Law (1991), Texas Board of Legal Specialization

Fellow, American Bar Association

Fellow, Texas Bar Foundation

“AV”-rated by Martindale-Hubbell Law Directory

Named as Super Lawyer by Law & Politics Media and the publishers of Texas Monthly (2003-

2012)

American Board of Trial Advocates, Member

PROFESSIONAL & CONTINUING LEGAL EDUCATION ACTIVITIES

Co-author, Texas Practice Guide: Insurance Litigation (West 2000-2011)

State Bar of Texas Pattern Jury Charges Committee – “Business, Consumer, Insurance &

Employment”; Chair (2009-2011); Vice Chair (2006-2008); Member (1995-2014)

Consumer Law Council, State Bar of Texas Consumer Law Section: Chair (1994-1995);

Co-chair, Continuing Legal Education Committee (1992-1995); Member (1988-2002)

Frequent Lecturer and Author, for State Bar of Texas, University of Texas School of Law,

Southern Methodist University School of Law, St. Mary’s University School of Law, Texas Tech

University School of Law, University of Houston School of Law, and South Texas College of

Law

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PJC Insurance Contract Questions – Draft #9 (4/11/14)

PJC 101.1 Basic Question—Existence

QUESTION ______

Did Paul Payne and Don Davis agree [insert all disputed terms]?

[Insert instructions, if appropriate.]

Answer “Yes” or “No.”

Answer: _______________

COMMENT

When to use. PJC 101.1 submits the issue of the existence of an agreement. It should be used if there is a dispute about the existence of an agreement or its terms and a specific factual finding is necessary to determine whether the agreement constitutes a legally binding contract. (See the discussion of consideration and essential terms below.) Usually PJC 101.1 will apply in cases involving oral agreements, oral modification of written agreements, and agreements based on several written instruments.

Broad-form submission. The broad form of this question follows the mandate of Tex. R. Civ. P. 277, which states: “In all jury cases the court shall, whenever feasible, submit the cause upon broad-form questions.”

In some cases an even broader question that combines issues of both existence and breach of an agreement may be appropriate. For example:

Did Don Davis fail to comply with the agreement, if any?

In such a case, however, care should be taken that the submission does not ask the jury to decide questions of law, which must be determined by the court alone. MCI Telecommunications Corp. v. Texas Utilities Electric Co., 995 S.W.2d 647, 650–51 (Tex. 1999) (construction of unambigu-ous contract is question of law for court).

Accompanying instructions. In most cases, the court should instruct the jury to consider the facts and circumstances surrounding the contract’s execution. See PJC 101.3.

Essential terms. To be enforceable, a contract must be reasonably definite and certain. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992); Kirkwood & Morgan, Inc. v. Roach, 360 S.W.2d 173, 175 (Tex. Civ. App.—San Antonio 1962, writ ref’d n.r.e.). Failure to agree on or include an essential term renders a contract unenforceable. T.O. Stanley Boot Co., 847 S.W.2d at 221. The court should include in PJC 101.1 all disputed terms essential to create an enforceable agreement. A disputed nonessential term should also be included if it is the basis of the plaintiff’s claim for damages.

Some omitted terms supplied by law. Some omitted terms will be supplied by application of law, and the failure to include those terms will not render the agreement invalid. See, e.g., PJC

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101.10 (instruction on time of compliance) and 101.13 (instruction on price). In such cases it is not necessary to secure a jury finding on the parties’ agreement to those terms, and they should not be included in PJC 101.1 unless their absence will be confusing to the jury. See America’s Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 625 (Tex. App.—San Antonio 1996, writ denied). The circumstances of each case will determine whether it is appropriate to include instructions such as those contemplated by PJC 101.10 and 101.13.

Agreement contemplating further negotiations or writings. During negotiations, the parties may agree to some terms of the agreement with the expectation that other terms are to be agreed on later. Such an expectation may not prevent the agreement already made from being an enforceable agreement if the circumstances indicate that the parties intended to be bound. Scott v. Ingle Bros. Pacific, Inc., 489 S.W.2d 554, 555–56 (Tex. 1972); see also Simmons & Simmons Construction Co. v. Rea, 286 S.W.2d 415 (Tex. 1955); but see Ski River Development, Inc. v. McCalla, 167 S.W.3d 121, 134 (Tex. App.—Waco 2005, pet. denied) (when contract left material and essential terms for future negotiation, agreement was not definite and specific and, therefore, was not enforceable). In such a case, the basic issue submitted in PJC 101.1 should be modified to inquire whether the parties intended to bind themselves to an agreement that includes the terms initially agreed on. Scott, 489 S.W.2d at 555. Case law suggests the following question:

Did Paul Payne and Don Davis intend to bind themselves to an agreement that included the following terms:

[Insert disputed terms.]

See Scott, 489 S.W.2d at 555; see also Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768, 814 (Tex. App.—Houston [1st Dist.] 1987, writ ref’d n.r.e.), cert. dismissed, 485 U.S. 994 (1988) (applying New York law).

A similar issue is presented if the parties reach preliminary agreement on certain material terms yet also contemplate a future written document. Whether the parties intended to be bound in the absence of execution of the final written document is ordinarily a question of fact. Foreca, S.A. v. GRD Development Co., 758 S.W.2d 744 (Tex. 1988). The Foreca opinion approves the following submission in such a case:

Do you find that the writings of September 2, 2001, and October 19, 2001, consti-tuted an agreement whereby [insert disputed terms]?

The court cited comment c to section 27 of the Restatement (Second) of Contracts (1981) as setting forth circumstances that may be helpful in determining whether a contract has been formed. Foreca, S.A., 758 S.W.2d at 746 n.2. The court did not make it clear, however, whether these considerations should be included in the jury instructions.

Insurance contracts. In an insurance case when there is a written insurance policy, the existence of the agreement is not disputed, so the general question in PJC 101.1 is unnecessary. Alternate questions suitable for insurance disputes that focus on whether claims are covered by specific contract language are found in PJC 101.47 and 101.48.

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PJC 101.6 Conditions Precedent (Comment)

Conditions precedent defined. “A condition precedent may be either a condition to the formation of a contract or to an obligation to perform an existing agreement. Conditions may, therefore, relate either to the formation of contracts or to liability under them.” Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976). “A condition precedent is an event that must happen or be performed before a right can accrue to enforce an obligation.” Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992).

Conditions precedent to an obligation to perform are acts or events that are to occur after the contract is made and that must occur before there is a right to immediate performance and before there can be a breach of contractual duty. Hohenberg Bros. Co., 537 S.W.2d at 3.

Creation of condition precedent. Although no particular words are necessary to create a condition, terms such as “if,” “provided that,” and “on condition that” usually connote a condition rather than a covenant or promise. Absent such a limiting clause, whether a provision represents a condition or a promise must be gathered from the contract as a whole and from the intent of the parties. Temple-Eastex Inc. v. Addison Bank, 672 S.W.2d 793, 798 (Tex. 1984); Hohenberg Bros. Co., 537 S.W.2d at 3.

Conditions not favored. To prevent forfeitures, courts are inclined to construe provisions as covenants rather than as conditions. PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630, 636 (Tex. 2008); Criswell v. European Crossroads Shopping Center, Ltd., 792 S.W.2d 945, 948 (Tex. 1990); Rogers v. Ricane Enterprises, 772 S.W.2d 76, 79 (Tex. 1989); Henshaw v. Texas Natural Resources Foundation, 216 S.W.2d 566, 570 (Tex. 1949).

Insurance cases. These principles apply to insurance contracts. Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173-74 (Tex. 1995). For additional discussion, see PJC 101.50.

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PJC 101.47 Insurance Contracts Distinguished from Other Contracts (Comment) In most insurance breach of contract cases, there is no dispute whether the parties had an agreement, because the insurance policy is the agreement. In these cases, the general PJC 101.1 question asking whether the parties had an agreement is unnecessary. Common disputed issues are whether an event is covered or excluded by specific policy language, whether another contractual defense or limitation applies, or the amount of the covered loss. The following alternative questions focus on those issues. PJC 101.48 offers a single question asking the jury to determine liability, causation, and damages. The question asks the amount of the covered loss, if any, and instructs the jury to exclude any amount that was not covered. An alternative is to ask whether the insurer breached the contract by failing to pay for a loss or event covered by specific policy language. When the liability question does not include damages and when consequential damages are sought, a separate question and instructions on damages as in PJC 115.3 - PJC 115.5 are required. PJC 101.49 asks whether a loss or event is excluded by specific policy language. The question may be adapted to submit other limitations, avoidances, and policy defenses.

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PJC 101.48 Insurance Contracts – Coverage and Damages Question – Specific Policy Language

QUESTION _____

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Paul Payne for his [unpaid] damages [, if any,] [that were (partly / solely) caused by / resulted from / because of] the [description of covered loss]?

[Do not include in your answer damages, if any, caused by (description of excluded cause.)]

[Insert other instructions and definitions, if appropriate.]

Answer in dollars and cents, if any.

ANSWER: ________________________________________

COMMENT

When to use. This question may be used to ask whether a loss or event is covered by specific insurance policy language when there is no dispute that an insuring agreement exists, but the parties dispute whether a loss or event is covered, or dispute the amount of the covered loss. Because the question does not ask whether the insurer failed to comply with the agreement, the question is proper only when it is clear that, if there was a covered loss, the insurer breached the contract by failing to pay it.

If the existence of an agreement is disputed, PJC 101.1 should be submitted before this question.

When damages are not disputed, “if any” should be omitted.

When an excluded cause would limit recovery, the trial court may submit the exclusion by instructing the jury not to include excluded damages. Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676 (Tex. 1973) (trial court may submit exclusion by instruction). The “do not include” instruction should not be used in cases when no excluded cause is at issue. The instruction also should not be used when an exclusion is not disputed but recovery is sought based on an exception to an exclusion.

This question determines the amount of benefits, if any, owed under the policy, so a separate question on direct damages is not required. Additional questions are required for any alleged consequential damages and attorney’s fees. Form questions are set out in PJC 115.3-115.5 and PJC 115.47.

Alternate question – specific policy language. If it is not clear that finding a covered loss also establishes the insurer’s breach of contract by failing to pay, the question may be modi-fied as follows, to ask whether the insurer failed to comply with the agreement.

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QUESTION _______

Did Insurer Inc. fail to comply with the agreement?

[Insurer Inc. failed to comply with the agreement if it failed to pay for [all] the damages, if any, caused [partly or solely] by [description of covered loss, event, or cause]?

[Insert instructions and definitions, if appropriate.]

Answer “Yes” or “No.”

Answer: ____________________

The word “all” should be included if the insurer has paid benefits but there is a dispute whether the insurer paid all that was owed.

Because this liability question does not include damages, a separate question and instruc-tions on damages are required, as in PJC 115.3 - PJC 115.5. Because non-payment of an excluded loss is not a failure to comply with the agreement, this question should not be used when an exclusion is at issue.

Source of questions. The primary question is based on PJC 115.3, which submits contract damages. See also Crisp v. Sec. Nat’l Ins. Co., 369 S.W.2d 326, 327-28 (Tex. 1963); New York Underwriters Ins. Co. v. Coffman, 540 S.W.2d 445, 453 (Tex. Civ. App.—Fort Worth 1976, writ ref’d n.r.e.); Commercial Ins. Co. of Newark, N. J. v. Colvert, 425 S.W.2d 34, 36-37 (Tex. Civ. App.—Fort Worth 1968, no writ).

When there is no dispute that the insurer’s failure to pay would breach the contract if a certain loss or event occurred:

• The charge may ask about a disputed fact that determines coverage under specific policy language. See, e.g., Houston Fire & Cas. Ins. Co. v. Walker, 152 Tex. 503, 505-06, 260 S.W.2d 600, 601-02 (1953) (whether lightning struck tree); Cox v. Nat’l Life & Acc. Ins. Co., 420 S.W.2d 213, 215 (Tex. Civ. App.—El Paso 1967, writ ref’d n.r.e.) (whether insured was not in sound health).

• The charge may ask about a fact that determines coverage under a statutory provision. See Guevara v. Guevara, No. 04-01-00326-CV, 2002 WL 562179, *2 (Tex. App.—San Antonio Apr. 17, 2002, pet. denied) (whether beneficiary murdered insured, which under statute would forfeit benefits).

• The charge may ask whether an admitted event satisfies specific policy language. See, e.g., Boyd v. Progressive County Mut. Ins. Co. v. Boyd, 177 S.W.3d 919, 920 (Tex. 2005) (whether accident involved “uninsured motor vehicle”).

The alternate question is based on PJC 101.02.

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The questions are adapted from jury questions based on specific policy language mentioned in the following cases: Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., Inc., 811 S.W.2d 552, 554-55 & n. 3 (Tex. 1991); Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676, 677-79 (Tex. 1973); Employers Mut. Cas. Co. of Des Moines, Iowa v. Nelson, 361 S.W.2d 704, 706-07 (Tex. 1962); Telepak v. United Services Auto. Ass’n, 887 S.W.2d 506, 507 (Tex. App.—San Antonio 1994, writ denied).

Causation. Insurance policies may cover losses “caused by,” “resulting from,” or “because of” a covered event, or some other causation standard. The causation language should be modified to conform to the policy.

“Partly or solely” – Concurrent causation and allocation. Depending on the policy language, a loss may be covered if it is partially caused by a covered risk, even if damage was also caused by an excluded risk, to the extent the damage can be allocated between the causes. See Utica Nat’l Ins. Co. of Texas v. Am. Indem. Co., 141 S.W.3d 198, 204 (Tex. 2004). Under the concurrent causation doctrine, when the insurer pleads an exclusion under the policy, the insured must get jury findings that damage was caused solely by the covered risk, or segregate the damage caused by the insured peril from that caused by an excluded peril. Travelers Indem. Co. v. McKillip, 469 S.W.2d 160, 162 (Tex. 1971). PJC 101.48 allocates damages by asking the amount of damage caused by the covered risk and instructing the jury to not consider damage caused by an excluded risk.

If there is no question of covered versus excluded causes, it is unnecessary to include the phrase “partly or solely.”

In other cases, policy language may provide that a loss is covered only if it is caused solely by a covered risk, exclusive of all other causes. See, e.g., Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676, 677-79 (Tex. 1973) (coverage for death resulting from bodily injury independent of all other causes). In such a case “solely” should be included in the question, and “partly” should not.

Description of covered loss / Instructions based on policy language. The “description of covered loss” submitted to the jury should include any coverage language and any exception to an exclusion on which the insured relies. When instructions are given, they generally should follow the terms in the policy. Int’l Travelers Ass’n v. Marshall, 131 Tex. 258, 262, 114 S.W.2d 851, 852 (1938); Mut. Life Ins. Co. of New York v. Steele, 570 S.W.2d 213, 217 (Tex. Civ. App.–Houston [14th Dist.] 1978, writ ref’d n.r.e.).

It may be error to submit an instruction that does not sufficiently track the policy language. See Aetna Life Ins. Co. v. McLaughlin, 380 S.W.2d 101, 106 (Tex. 1964); New York Underwriters Ins. Co. v. Coffman, 540 S.W.2d 445, 450 (Tex. Civ. App.–Fort Worth 1976, writ ref’d n.r.e.). But any error may be harmless if the deviation is not material. See New York Underwriters v. Coffman, 540 S.W.2d at 450-51; Truck Ins. Exch. v. Ballard, 343 S.W.2d 953, 957-59 (Tex. Civ. App.—Austin 1961, writ ref’d n.r.e.). An instruction that submits policy language but unduly emphasizes one part is erroneous. Employers Mut. Cas. Co. of Des Moines, Iowa v. Nelson, 361 S.W.2d 704, 706-07 (Tex. 1962) (question overemphasized “settling” in phrase “settling, shrinkage or expansion”).

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It is not error to omit policy language about an element that is undisputed. See Nat’l County Mut. Fire Ins. Co. v. Wallace, 673 S.W.2d 410, 411-12 (Tex. App.—Houston [1st Dist.] 1984, no writ); U. S. Fire Ins. Co. v. Skatell, 596 S.W.2d 166, 169 (Tex. Civ. App.—Texarkana 1980, writ ref’d n.r.e.).

While instructions based on policy language may be helpful, they are not always required. In State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 451-52 (Tex. 1997), the court held it was not error to refuse instructions that would have tracked the policy, when the policy was in evidence, the relevant language was presented to the jury and discussed at length, and there was no dispute about the meaning of the policy terms. In other circumstances, including instructions that submit the relevant policy language may assist the jury.

Instruction based on judicial construction or definition. It may be necessary to deviate from the exact policy language to correctly submit an issue, for example, when the language has been judicially construed or qualified. See S. Farm Bureau Life Ins. Co. v. Dettle, 707 S.W.2d 271, 272-73 (Tex. App.—Amarillo 1986, no writ) (instruction added “intentional” to policy definition of suicide, to conform to judicial decisions); Slocum v. United Pac. Ins. Co., 615 S.W.2d 807, 810 (Tex. Civ. App.—Houston [1st Dist.] 1981, writ ref’d n.r.e.) (deviation to instruct jury on court’s interpretation was proper).

If the court construes the meaning of a contract term, the jury should be given an instruc-tion with that interpretation. See PJC 101.7.

The court also may submit a definition of a term not defined by the policy. See, e.g., Employers Mut. Cas. Co. of Des Moines, Iowa v. Nelson, 361 S.W.2d 704, 706-07, 709 (Tex. 1962) (“normal” and “partial collapse”); Robinson v. Aetna Life Ins. Co., 276 S.W. 900, 902 (Tex. Comm’n App. 1925, judgm’t adopted) (“apoplexy”); Brooks v. Blue Ridge Ins. Co., 677 S.W.2d 646, 651-52 (Tex. App.—Amarillo 1984, writ ref’d n.r.e.) (“tenant”).

It is not error for the trial court to decline to submit definitions of common terms. See Prudential Ins. Co. of Am. v. Uribe, 595 S.W.2d 554, 557-58, 563 (Tex. Civ. App.—San Antonio 1979, writ ref’d n.r.e.) (trial court did not define “duties” or “passenger”).

“Do not include” - Instruction on excluded or paid damages. When an exclusion is at issue, the jury should be instructed not to include damages, if any, from the excluded cause. Any instruction should follow the policy language upon which the insurer relied, subject to the other rules set out above.

When no exclusion is at issue, or when the dispute is over whether an exception to the exclusion applies, the “do not include” instruction will be omitted.

When the jury hears evidence that the insurer has partially paid the loss, the jury should be instructed not to include in the answer any sums that have already been paid, to avoid confu-sion as to whether the insurer is entitled to or will receive a credit. Alternatively, the jury could simply be asked to determine the amount of “unpaid” damages.

Instructing jury on measure of damages. It may be appropriate to instruct the jury on the measure of damages under the applicable policy provision. See U. S. Fire Ins. Co. v. Stricklin, 556 S.W.2d 575, 582 (Tex. Civ. App.—Dallas 1977), writ ref’d n.r.e. sub nom.,

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Stricklin v. U.S. Fire Ins. Co., 565 S.W.2d 43 (Tex. 1978) (trial court should instruct jury on difference in value as measure of damages); New York Underwriters Ins. Co. v. Coffman, 540 S.W.2d 445, 453 (Tex. Civ. App.—Fort Worth 1976, writ ref’d n.r.e.) (“daily loss of rental income” defined); Commercial Ins. Co. of Newark, N. J. v. Colvert, 425 S.W.2d 34, 36-37 (Tex. Civ. App.—Fort Worth 1968, no writ) (“reasonable cash market value”).

When a damage limitation in the policy is raised by the evidence, it is error not to instruct the jury. Hibernia Ins. Co. v. Starr, 13 S.W. 1017 (Tex. 1890). It is also error not to instruct the jury on failure to mitigate, when raised by the evidence. Eagle Star & British Dominions Ins. Co. of London, England v. Head, 47 S.W.2d 625, 630 (Tex. Civ. App.—Amarillo 1932, writ dism’d w.o.j.). A defensive mitigation instruction is found in PJC 115.8.

Many property policies impose a duty on the insured after a loss to protect the property from further damage and make reasonable and necessary repairs to protect the property. See Carrizales v. State Farm Lloyds, 518 F.3d 343, 349 (5th Cir. 2008) (construing Texas law). Mitigation costs, therefore, are a recoverable element of damages, as in other contract cases. PJC 115.4 provides an instruction for recovering mitigation expenses.

Ambiguity. When an insurance contract is ambiguous and the court resolves the ambiguity by adopting the construction most favorable to the insured, there is no jury question on the parties’ intent. See Progressive Co. Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 808 (Tex. 2009); State Farm Fire & Cas. Co. v. Reed, 873 S.W.2d 698, 699 (Tex. 1993). The standard Pattern Jury Charge instruction on ambiguity in other contract cases, which asks about the intent of the parties, would not be correct in such a case. See PJC 101.8 & Comment.

Multiple coverage provisions. If the loss is potentially covered by more than one policy provision, the question should be modified to include each disputed provision.

Burden of proof – separate question for exclusions and other defenses. This question puts the burden of proof on the insured. A separate question could ask whether the loss resulted from an excluded cause or fit within some other limitation, avoidance, or defense. See PJC 101.49. Separate questions may be required because the insured has the initial burden to show a loss is covered Employers Casualty Co. v. Block, 744 S.W.2d 940, 945 (Tex. 1988), and then the insurer has the burden to establish any exclusions. Tex. R. Civ. P. 94, Tex. Ins. Code Ann. § 554.002. This question, placing the burden on the insured, would also be proper to submit any exception to an exclusion that would bring the loss back within coverage. Telepak v. United Serv. Auto. Ass’n, 887 S.W.2d 506, 507-08 (Tex. App.—San Antonio 1994, writ denied).

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PJC 101.49 Insurance Contracts – Exclusions, Limitations, Avoidance & Other Affirmative Defenses – Specific Policy Language

QUESTION ______

[Were Paul Payne’s damages] [Was the (loss) (event) (other description)] [, if any,] caused [partly or solely] by [description of excluded cause]?

[Insert instructions and definitions, if appropriate.]

Answer “Yes” or “No.”

Answer: ____________________

COMMENT

When to use. An insurer has the burden to plead and prove any exclusion, limitation, avoidance, or other affirmative defense. Tex. R. Civ. P. 94; Tex. Ins. Code Ann. § 554.002. The submission of the question of a policy exclusion may require a separate special issue. Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676, 679 (Tex. 1973). When the insurer’s exclusion, limitation, or other defense to coverage would be a complete bar to recovery, this question would be proper to submit the defense. When the defense merely limits recovery, PJC 101.48 should be used to allocate damages between covered and excluded causes. The proper sequence of these questions may depend on the facts of the particular case.

If damages are not disputed, “if any” should be omitted.

Defenses. The general PJC contract questions submit defenses by asking whether the failure to comply was “excused” and then instructing on excuses, such as the plaintiff’s material breach, anticipatory repudiation, waiver, estoppel, duress, mistake, etc. See PJC 101.21-101.42. The question could be modified to ask about any defense that would excuse the insurer from payment, other than a policy exclusion (see question above) or the failure of the insured to perform a condition or covenant (see PJC 101.50).

QUESTION ____________

Was Insurer Inc.’s failure to comply excused?

[For its failure to comply to be excused, Insurer Inc. must show (insert exception, limitation, avoidance, or other affirmative defense)].

Answer “Yes” or “No.”

Answer: ____________________

Instruction on exclusion or limitation. When the evidence raises an exclusion or limitation on liability, the court should give a proper instruction. Hibernia Ins. Co. v. Starr, 13 S.W. 1017 (Tex. 1890).

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When submitting specific questions based on policy exclusions, it may be necessary to instruct the jury on judicial interpretation of specific policy language. For example, in Aetna Life Ins. Co. v. McLaughlin, 380 S.W.2d 101, 102 (Tex. 1964), the supreme court decided which rule to follow in determining whether suicide by the insured barred recovery under an accidental death policy. After adopting the majority rule, the court held that the trial court’s instruction following the minority rule was erroneous. Id. at 105. See also Republic Nat’l Life Ins. Co. v. Heyward, 536 S.W.2d 549, 556 (Tex. 1976) (judicial construction of “accidental death”); Int’l Travelers Ass’n v. Marshall, 131 Tex. 258, 262, 114 S.W.2d 851, 852-53 (1938) (instruction on judicial construction of “accidental means”).

“Partly or solely” – Concurrent causation and allocation. Depending on the policy language, a loss may be covered if it is caused by a covered risk, even if damage was also caused by an excluded risk, to the extent the damage can be allocated between the causes. See Utica Nat’l Ins. Co. of Texas v. Am. Indem. Co., 141 S.W.3d 198, 204 (Tex. 2004). Under the con-current causation doctrine, when the insurer pleads an exclusion under the policy, the insureds must get jury findings that damage was caused solely by the covered risk or segregate the damage caused by the insured peril from that caused by an excluded peril.” Travelers Indem. Co. v. McKillip, 469 S.W.2d 160, 162 (Tex. 1971).

If there is no question of covered versus excluded causes, it is unnecessary to include the phrase “partly or solely.”

In other cases, policy language may provide that a loss is covered only if it is caused solely by the covered risk, exclusive of all other causes. See, e.g., Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676, 677-79 (Tex. 1973) (coverage for death resulting from bodily injury independent of all other causes). In such a case “solely” should be included in the question, and “partly” should not. In such a case, a finding that the loss was caused solely or partly by an excluded cause would preclude recovery, and it would be proper to condition the damage question on a negative finding on the exclusion.

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PJC 101.50 Insurance Contracts – Conditions Precedent & Prejudice (Comment)

Burden of proving compliance. “A party seeking to recover under a contract bears the burden of proving that all conditions precedent have been satisfied.” Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 283 (Tex. 1998). “Conversely, if an express condition is not satisfied, then the party whose performance is conditioned is excused from any obligation to perform.” Solar Applications Eng'g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 108 (Tex. 2010); See Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173-74 (Tex. 1995).

Conditions precedent defined / Creation of condition precedent / Conditions not favored. These principles are discussed in PJC 101.6, supra.

Prejudice – Burden of proof. An insured’s failure to comply with a condition precedent does not relieve the insurer of liability unless that failure prejudices the insurer, and the insurer has the burden to show prejudice. Prodigy Communications Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374, 378 (Tex. 2009); PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630, 636 (Tex. 2008); Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 174 (Tex. 1995.

Form of questions. If there is a fact issue whether the insured complied with a condition precedent, a question similar to PJC 101.48 and 101.49, that tracks the contract language and places the burden on the insured, should be submitted.

QUESTION

Did Paul Payne [notify the insurer of the suit / give notice of the claim as soon as practical / etc.]?

See Prodigy Communications Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374, 378 (Tex. 2009); Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 174 (Tex. 1995).

When raised by the evidence, a question asking whether the insurer was prejudiced should be submitted, conditioned on a finding that the insured failed to comply. See Prodigy Communications, 288 S.W.3d at 378; Harwell, 896 S.W.2d at 174.

QUESTION

Was Insurer, Inc. prejudiced by Paul Payne’s failure to [notify the insurer of the suit / give notice of the claim as soon as practical / etc.]?

When to use. This question would be proper when failure to comply with a condition precedent precludes liability. When the remedy for failure to comply with a condition precedent is abatement, the matter would be handled before trial, so no jury question should be submitted. (include Phil. Under. Cite)

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Instructions based on policy language. The principles regarding tracking policy language found in PJC 101.48 and 101.49 should be followed. Excuse. If the court determines that the insurance case presents an instance where failure to comply with the condition precedent may be excused, the court should charge the jury with the elements of excuse. See e.g., Employers Casualty Co. v. Scott Electric 513 S.W.2d 642 (Tex. App.— Corpus Christi 1974); Proctor v. Southland Life Insurance Co., 522 S.W.2d 261 (Tex. App— Fort Worth 1975); Dairy Land County Mutual Insurance Company v. Roman, 486 S.W.2d 847 (Tex. App—San Antonio 1972).

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PJC 101.24 – Instruction on Waiver

PJC 101.25 – Instruction on Equitable Estoppel

PJC 101.41 – Question on Promissory Estoppel

ADD:

Waiver and estoppel in insurance cases. The rules of waiver and estoppel apply differently in insurance cases. The principle has been stated:

Waiver and estoppel may operate to avoid forfeiture of a policy, but they have consistently been denied operative force to change, re-write and enlarge the risks covered by the policy. In other words, waiver and estoppel cannot create a new and different contract with respect to risks covered by the policy.

Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 780 (Tex. 2008). If the court determines that the insurance case presents an instance where waiver or estoppel may apply, those issues may be submitted. See Riggs v. Sentry Ins., 821 S.W.2d 701, 705 (Tex. App.—Houston [14th Dist.] 1991, writ denied) (approving estoppel instructions); Preferred Risk Mut. Ins. Co. v. Rabun, 561 S.W.2d 239, 243-44 (Tex. Civ. App.—Austin 1978, writ dism’d) (finding elements of waiver by insurer’s agent).

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COMMENT PJC 101.8 Instruction on Ambiguous Provisions.

It is your duty to interpret the following language of the agreement:

[Insert ambiguous language.]

You must decide its meaning by determining the intent of the parties at the time of the agreement. Consider all the facts and circumstances surrounding the making of the agreement, the interpretation placed on the agreement by the parties, and the conduct of the parties.

COMMENT

When to use. If the court determines that the contract contains ambiguous language, PJC 101.8 should accompany PJC 101.1.

If a contract is unambiguous or if it is ambiguous but parol evidence of circumstances is undisputed, construction of the contract is an issue for the court. Brown v. Payne, 176 S.W.2d 306, 308 (Tex. 1943); In re Hite, 700 S.W.2d 713, 718 (Tex. App.—Corpus Christi 1985, writ ref’d n.r.e.). “Whether a contract is ambiguous is a question of law for the court to decide.” Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000); see also Dynegy Midstream Services, Ltd. P’ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009). If the court determines that the contract is ambiguous, the parties’ intent is a fact issue. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996).

Insurance cases. When an insurance contract is ambiguous and the court resolves the uncertainty favorably to the insured as a matter of law, there is no question for the jury. State Farm Fire & Cas. Co. v. Reed, 873 S.W.2d 698, 699 (Tex. 1993); see also Progressive County Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 808 (Tex. 2009); Glover v. Nat’l Ins. Underwriters, 545 S.W.2d 755, 761 (Tex. 1977). The preceding instruction about the intent of the parties would not be correct in such a case.

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COMMENT PJC 101.9 Trade Custom (Comment) ADD: Insurance cases. When an insurance contract is ambiguous and the court resolves the uncertainty favorably to the insured as a matter of law, there is no question for the jury See Progressive County Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 808 (Tex. 2009); State Farm Fire & Cas. Co. v. Reed, 873 S.W.2d 698, 699 (Tex. 1993). While evidence of trade usage or customs might be considered by the court in construing the policy, there will not be a jury question when the court construes the language as a matter of law. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., Inc., 780 S.W.2d 417, 423-24 (Tex. App.—Texarkana 1989), aff’d, 811 S.W.2d 552 (Tex. 1991) (trial judge interpreted policy and there was no fact issue as to parties’ intent). The standard Pattern Jury Charge instruction on trade custom to interpret an ambiguous contract would not be correct in such a case.

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PJC 115.3 Question on Contract Damages

[Insert predicate, PJC 115.1.]

QUESTION ______

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Paul Payne for his damages, if any, that resulted from such failure to comply?

Consider the following elements of damages, if any, and none other.

[Insert appropriate instructions. See samples in PJC 115.4 and instructions in PJC 115.5.]

Do not add any amount for interest on damages, if any.

Answer separately in dollars and cents for damages, if any.

1. [Element A] sustained in the past.

Answer: _______________

2. [Element A] that, in reasonable probability, will be sustained in the future.

Answer: _______________

3. [Element B] sustained in the past.

Answer: _______________

4. [Element B] that, in reasonable probability, will be sustained in the future.

Answer: _______________

COMMENT

When to use. PJC 115.3 should be predicated on a “Yes” answer to PJC 101.2 and may be adapted for use in most breach-of-contract cases by the addition of appropriate instructions setting out legally available measures of damages. See PJC 115.4 and 115.5. If only one measure of damages is supported by the pleadings and proof, the measure may be incorporated into the question.

Instruction required. PJC 115.3 may not be submitted without an instruction on the appropriate measures of damages. See Jackson v. Fontaine’s Clinics, Inc., 499 S.W.2d 87, 90 (Tex. 1973). See PJC 115.4 and 115.5 for sample instructions.

Causation. The phrase “resulted from” is derived from McKnight v. Hill & Hill Exterminators, Inc., 689 S.W.2d 206, 209 (Tex. 1985).

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Parallel theories. If the breach-of-contract cause of action is only one of several theories of recovery submitted in the charge and any theory has a different legal measure of damages to be applied to a factually similar claim for damages, a separate damages question for each theory may be submitted and the following additional instruction may be included earlier in the charge:

In answering questions about damages, answer each question separately. Do not increase or reduce the amount in one answer because of your answer to any other question about damages. Do not speculate about what any party’s ultimate recovery may or may not be. Any recovery will be determined by the court when it applies the law to your answers at the time of judgment.

Elements of damages submitted separately. The Committee generally recommends that multiple elements of damages be separately submitted to the jury. Harris County v. Smith, 96 S.W.3d 230, 233–34 (Tex. 2002) (broad-form submission of multiple elements of damages may lead to harmful error if there is a proper objection raising insufficiency of the evidence to support one or more of the elements submitted); see also Tex. Civ. Prac. & Rem. Code § 41.008(a) (“In an action in which a claimant seeks recovery of damages, the trier of fact shall determine the amount of economic damages separately from the amount of other compensatory damages.”). Separating economic from noneconomic damages is required to allow the court to apply the limits on recovery of exemplary damages based on economic and noneconomic damages as required by Tex. Civ. Prac. & Rem. Code § 41.008(b).

Further, “[p]rejudgment interest may not be assessed or recovered on an award of future damages.” Tex. Fin. Code § 304.1045 (wrongful death, personal injury, or property damage cases); see also Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514, 530 (Tex. 1998) (reconciling equitable prejudgment interest with statutory prejudgment interest); Perry Roofing Co. v. Olcott, 744 S.W.2d 929, 931 (Tex. 1988) (unliquidated damages in contract cases); Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549, 555–56 (Tex. 1985) (personal injury, later extended to other types of cases). Therefore, separation of past and future damages is required.

Elements considered separately. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 770 (Tex. 2002), provides an instruction for cases involving undefined or potentially overlapping categories of damages. In those cases, the following language should be substituted for the instruction to consider each element separately:

Consider the following elements of damages, if any, and none other. You shall not award any sum of money on any element if you have otherwise, under some other element, awarded a sum of money for the same loss. That is, do not compensate twice for the same loss, if any.

Prejudgment interest. Instructing the jury not to add interest is suggested because the court will calculate prejudgment interest, if recoverable, at the time of judgment. If interest paid on an obligation is claimed as an element of damages, it may be necessary to modify the instruc-tion on interest.

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PJC 115.3 Question on Contract Damages – COMMENT

Insurance cases. If the court submits a single question like PJC 101.48 that includes liability, causation, and damages, then a separate question like PJC 115.3 is not needed to determine the amount of policy benefits that are owed. However, if consequential damages are alleged in addition to policy benefits, then a separate question like PJC 115.3 is needed to determine the consequential damages.

This question may be used to submit both direct and consequential damages in an insurance case when the court submits alternate breach of contract questions that do not decide damages. The question should be modified to reflect the proper causation standard based on the insurance contract language, and to instruct the jury on what damages to include and exclude. For example:

QUESTION ______

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Paul Payne for his [unpaid] damages [, if any,] [that were (partly or solely) caused by / that resulted from / because of] the [description of covered loss or event / such failure to comply]?

Consider the following elements of damages, if any, and none other.

[Insert appropriate instructions that describe the covered loss or event found in answer to PJC 101.48, and any consequential damages. See samples in PJC 115.4 and instructions in PJC 115.5.]

[Do not include in your answer damages, if any, caused by (excluded cause).]